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MND / MNP - Mondi - Interim Report For The Six Months Ended 30 June 2007
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND & ISIN: ZAE000097051
Mondi plc
(Incorporated in England and Wales)
(Registration number: 6209386)
JSE share code: MNP & ISIN: GB00B1CRLC47
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2007
Financial Summary
EUR million, except for percentages
and per share 6 months 6 months Half year
measures June 2007 June 2006 change %
Group revenue 3,052 2,857 +7
EBITDA (1) 421 343 +23
Underlying operating profit (2) 243 166 +46
Underlying profit before tax (3) 203 125 +62
Reported profit before tax 250 64
Basic pro forma earnings per share
(EUR cents per share) (4) 31.9 2.7
Underlying pro forma earnings per
share (EUR cents per share) (4), (5) 22.6 11.9 +90
Headline pro forma earnings per share
(EUR cents per share) (4), (5) 17.3 12.1 +43
Interim dividend per share (EUR cents
per share) 7.3 N/A N/A
Cash inflow from operations 356 229 +55
Group ROCE (6) 10.0% 8.2% +22
Highlights:
- Group revenue up 7% at EUR3.1 billion
- EBITDA up 23% at EUR421 million
- Underlying operating profit up 46% at EUR243 million driven by an improved
operating performance across the Group and significant pick up in the
trading environment in Mondi Packaging and a major turnaround in the South
African operations within Mondi Business Paper
- Successful listing of the Mondi Group on the JSE and LSE on 3 July 2007
completes demerger from Anglo American plc
David Hathorn, Mondi Group Chief Executive, said:
"I am very pleased that Mondi`s first set of results as an independent Group
shows a substantial recovery in operating profits and reflects an improved
operating performance and trading environment across all business areas.
In the second half we expect to see continued pressure from rising input costs
and weakness of the US dollar. However, the positive trends in Mondi`s key
business segments are expected to continue and the Board is confident of
achieving good progress for the year as a whole."
1 EBITDA is operating profit of subsidiaries and joint ventures before special
items, depreciation and amortisation.
2 Underlying operating profit is operating profit of subsidiaries and joint
ventures before special items.
3 Underlying profit before tax is reported profit before tax before special
items.
4 The calculation of basic earnings, underlying earnings and headline earnings
per share has been based on the actual number of shares issued on admission
to the Johannesburg and London stock exchanges of 514,137,127 shares.
5 The Group has presented underlying earnings per share to exclude the impact
of special items, in order to present an additional comparise for the
periods shown in the combined condensed and consolidated financial statement,
and headline earnings per share to exclude the impact of special items apart
from demerger costs that have been reflected as special items.
6 Group return on capital employed (ROCE) is an annualised measure based on
underlying operating profit plus share of associates net earnings divided by
average trading capital employed.
Group Performance Overview
The Group experienced a substantial improvement in operating performance in the
first half of 2007, with underlying operating profit of EUR243 million up EUR77
million or 46% on the first half of 2006.
We saw an improved operating performance across the Group and a significant
pick up in the trading environment in Mondi Packaging, with price increases
achieved across all major paper grades. Mondi Business Paper also benefited
from the improved operability of the PM31 paper machine in Merebank, South
Africa, as well as modest increases in uncoated woodfree paper pricing. These
positive developments were partially offset by significant inflation in fibre
costs (wood, pulp and recycled fibre) as a result of strong Chinese fibre
demand and alternative uses for wood in Europe.
Mondi Packaging`s underlying operating profit increased by EUR48 million, up
49%, with the Corrugated Business benefiting from higher containerboard prices,
coupled with some improvement in the converting operations and better
performances in both the Bag and Flexibles Businesses. Mondi Business Paper`s
underlying operating profit increased by EUR34 million, or 74%, principally
because of a significant turnaround in the South Africa operations. This was
due to a restructuring of the business resulting in the improved operating
performance of PM31 paper machine in Merebank following the rebuild in 2005 and
cost reductions throughout the business. Mondi Packaging South Africa
underlying operating profit was in line with the prior year (rand exchange rate
adversely impacted translation of results into euros), but was up 25% in local
currency on the back of improved pricing and demand. Corporate costs were
higher as a result of establishing Mondi`s own corporate presence through the
demerger from Anglo American plc.
Underlying operating margin was 8.0% (2006: 5.8%) reflecting the good operating
performance and improvement in pricing which was partially offset by input cost
pressures. The Group achieved EUR73 million in cost savings and profit
improvement initiatives in the first half of 2007, partly compensating for
higher fibre and other input costs. The improved operating performance and
lower capital employed in the current period meant that the Group`s return on
average capital employed to June 2007 was 10.0% versus 8.2% in the prior year.
Underlying proforma earnings per share, calculated based on the combined number
of ordinary shares for Mondi Limited and Mondi plc in issue on Admission to the
Johannesburg and London stock exchanges for the period were 22.6 euro cents per
share, up 90% on the first half of 2006. The Group will pay a maiden interim
dividend of 7.3 euro cents per share.
Mondi Packaging
EUR million 6 months 6 months Half year
June 2007 June 2006 change %
Segment revenue 1,736 1,550 +12
- of which inter -segment revenue 19 23
EBITDA 237 191 +24
Underlying operating profit 146 98 +49
Corrugated Business 66 39 +69
Bag Business 64 49 +31
Flexibles Business 16 10 +60
Capital expenditure 60 106 -43
Net segment assets 2,551 2,412 +6
Return on net segment assets (%) (7) 11.0% 9.0% +22
7 Return on net segment assets is an annualised measure based on underlying
operating profit divided by average net segment assets.
Mondi Packaging results benefited from record production, ongoing productivity
and efficiency gains, an improved trading environment and the restructuring
actions taken in 2006. This was mitigated by increased wood and recycled paper
costs which were up 27% and 26% respectively on the comparable period.
Within the Corrugated Business, the positive containerboard price trends and
demand growth which were seen in 2006 have continued into 2007. Kraftliner
prices were almost flat compared to end of 2006, but up by some 15% compared to
the first half of 2006 with white top kraftliner up 4% (1).
Corrugated box prices increased reflecting the passing on of containerboard
price increases, however, profit margins remain at an unsatisfactory level and
further box price increases are required. The increase in profits was supported
by the restructuring of the downstream corrugated packaging operations in 2006.
The Bag Business recorded improved kraft paper prices and volumes and is
further benefiting from the acquisition of Stambolijski in the second half of
2006. The Bag business downstream converting operations also saw a strong
improvement in demand in the first half, mainly from the Construction Industry,
leading to an unusually high sales volume increase of 4%.
Improvement in the Flexibles Businesses was mainly driven by price increases
and efficiency enhancements and also includes the benefit from acquisitions
made in the second half of 2006.
Mondi Packaging delivered EUR33 million of profit improvements and cost savings
in the period. A record packaging paper production output was achieved
(production volumes up 5%) with 5 out of 13 paper mills achieving new
production records in the period. In addition the Swiecie mill successfully
completed the major rebuild of PM1.
During the period, the 40% associate equity stake in Bischof + Klein GmbH was
disposed of for EUR57 million resulting in a profit on sale of EUR19 million.
In addition, to avoid a mandatory offer for the minority interests in Mondi
Packaging Paper Swiecie S.A following Mondi`s demerger from Anglo American plc,
a 5.3% stake in Swiecie was disposed for EUR66 million resulting in a profit on
sale of EUR57 million (Mondi`s ownership post disposal is 66%).
On 6 July 2007 Mondi Packaging announced the acquisition of 53.56% of Tire
Kutsan, a Turkish corrugated packaging company and 100% of the Austrian based
Unterland flexible packaging operations, both subject to regulatory approval.
The debt free enterprise valuation of these acquisitions is EUR190 million and
EUR74 million respectively. Both these acquisitions are exciting additions to
the Mondi Group and strengthen our packaging division in two of its key
segments of corrugated and flexibles.
Finalisation of the level of available support from the Polish authorities for
the approved EUR350 million 470,000 tonne lightweight recycled containerboard
machine and new 250 million m2 per annum corrugated box plant at the Mondi
Packaging Paper Swiecie mill in Poland is progressing well. The completion date
is estimated to be mid to late 2009.
1 Source FOEX: PIX Packaging Europe Index History
Mondi Business Paper
EUR million 6 months 6 months Half year
June 2007 June 2006 change %
Segment revenue 966 958 +1
- of which inter -segment revenue 86 75
EBITDA 149 114 +31
Underlying operating profit 80 46 +74
Capital expenditure 52 84 -38
Net segment assets 2,180 2,157 +1
Return on net segment assets (%) (7) 6.4% 5.0% +28
The increase in underlying operating profit was largely driven by the
significant improvement in the South Africa operations. The operational
difficulties experienced in the first half of 2006, following the 2005 rebuild
of PM31 in Merebank, have now largely been addressed. The overall restructuring
of the South African operations is progressing well.
Uncoated woodfree production was 7.2% higher (continuing operations) than the
first half of 2006 supported by good performances at our Slovakian and Russian
mills. Total pulp production was up 10%, with the Richards Bay RB720 pulp line
operating at improved rates following commissioning in 2005.
The average uncoated woodfree paper price improvements of 5-6% since the
beginning of the year were mostly offset by higher pulp input costs at the
non-integrated mills, and higher purchased wood costs. The overall fibre cost
increase has been mitigated by our own low cost wood resources in South Africa
and Russia. Cost savings and profit improvement initiatives contributed EUR37
million during the period.
Further increases in paper prices are required for returns to reach acceptable
levels. Whilst industry mill operating rates have improved to over 90% (but
traditionally soften as we move into the European summer) we do expect to see
further improvement in operating rates post the European summer, helped by some
industry plant closure announcements, and the normal post summer pick up in
demand.
Mondi Business Paper will be taking usual downtime in the second half for
planned maintenance shuts at its major mills. In addition the headbox at the
PM31 paper machine will be further modified to ensure optimum performance,
which is scheduled to take up to 3 weeks. This will in total result in a
capacity reduction of 35,000 tonnes in the second half.
Mondi Business Paper is making good progress in obtaining the necessary
operating permits and agreement of governmental support for the approved EUR525
million modernisation and expansion at the Syktyvkar mill in Russia. Planning
for the project is progressing well with completion expected by mid 2010.
Mondi Packaging South Africa
EUR million 6 months 6 months Half year
June 2007 June 2006 change %
Segment revenue 173 185 -6
- of which inter -segment revenue 17 13
EBITDA 21 21 -
Underlying operating profit 15 15 -
Capital expenditure 14 16 -13
Net segment assets 208 202 +3
Return on net segment assets (%) (7) 17.1% 19.1% -10
Demand across all business segments has been strong largely due to an increase
in local consumption and a good agricultural season. Underlying operating
profit was 25% higher in local currency versus the first half of 2006 also
benefiting from a good operational performance. However, as a result of the
significantly weaker rand exchange rate, this improved result is flat year on
year on translation into euro.
The Springs mill optimisation project costing EUR12 million is on track for
commissioning in August 2007. The Felixton optimisation project costing EUR25
million, which is due for commissioning in March 2008 is progressing well and
will, when complete, enable Felixton to produce lighter weight paper and
increase production by 50,000 tonnes of fluting.
Regulatory approval was received on 4 July 2007 for the EUR100 million
acquisition of Lenco, a rigid plastics business. Lenco will be consolidated
from the beginning of the second half of 2007.
Merchant and Newsprint businesses
EUR million 6 months 6 months Half year
June 2007 June 2006 change %
260 +10
Segment revenue 286
- of which inter -segment revenue 1 -
22 +23
EBITDA 27
Underlying operating profit 16 12 +33
Capital expenditure 8 2 +300
Net segment assets 284 251 +13
Return on net segment assets (%) (7) 12.3% 7.7% +60
Merchant and Newsprint underlying operating profit at EUR16 million is up 33%
on the first half of 2006. This is due to improved pricing and volumes at
Europapier and improved prices and lower input costs at Aylesford. Mondi
Shanduka Newsprint underlying profit was higher in local currency but lower in
euros as a result of the weaker rand.
Corporate and other businesses
Corporate costs were EUR9 million higher than in the first half of 2006 due to
Mondi establishing itself as an independent business with certain functions
previously performed by Anglo American plc now being resourced by the Mondi
Group.
Operating special items
The pre-tax charge of EUR8 million is fully described in note 4 to the accounts
and is mainly made up of an asset impairment and charges relating to retention
arrangements.
Net profit on disposals
Net profit on disposal includes the sale of Bischof + Klein GmbH (EUR19 million
profit), the sale of a 5.3% stake in Mondi Packaging Paper Swiecie S.A. (EUR57
million profit), and the sale of various Corrugating converting operations (EUR8
million profit) and have been separately identified given their materiality. The
Corrugated converting operations, which were held for sale at the end of 2006,
were disposed of as part of a restructuring programme to improve the Corrugated
results.
Special finance charges
As part of the demerger from Anglo American plc, certain long term loans in
South Africa were closed out at a cost of EUR29 million, representing largely
the interest foregone on the settlement of the loans. Given the materiality of
this amount, the Board believe that it is more appropriate to disclose this
separately on the income statement.
Net finance costs
Net finance costs of EUR42 million, before special financing items, are EUR3
million lower than 2006 (EUR45 million) following the debt restructuring in
South Africa with Anglo American plc.
It should be noted that, going forward, finance costs will reflect Mondi`s new
capital structure.
Taxation
The effective tax rate at 30% was 3.6% lower than in 2006 due to the higher
level of non deductible expenditure in 2006 and fewer prior year adjustments.
Minority interests
Minority interests were EUR4 million higher than the first half of 2006 with
higher earnings at the main non-wholly owned subsidiaries of Mondi Packaging
Swiecie and Mondi Business Paper (Ruzomberok) partly offset by the benefit in
2006 of higher income on green energy credits and CO2 emission sales at both
Swiecie and Ruzomberok.
Underlying pro forma earnings per share
Underlying pro forma earnings per share have been calculated based on the
number of ordinary shares in issue on admission to the Johannesburg and London
stock exchanges on 3 July 2007. The potential dilutive impact of the share
schemes` awards coming into effect on or after 3 July 2007 will only be
assessed in the Group`s 2007 annual financial statements.
On a pro forma basis, underlying earnings per share were up 90% following the
improved operating result.
Interim dividend
A maiden interim dividend of 7.3 euro cents per share will be paid on 17
September 2007 to those shareholders on the register of Mondi plc on 31 August
2007.
An equivalent interim dividend will be paid in South African rand on 17
September 2007 to shareholders on the register of Mondi Limited on 31 August
2007. Holders of Mondi Limited Depositary Interests who hold their interests
through Lloyds TSB Registrars Corporate Nominee Limited will receive their
dividend in UK Sterling on 12 October 2007.
The Board intend that the final and interim dividends will be paid in
approximate proportions of two thirds (final) and one third (interim).
Cash flow and borrowings
Cash inflows from operations of EUR356 million were EUR127 million up on the
comparable period, benefiting from improved trading and tighter control of
working capital. Capital expenditure in the period of EUR139 million was EUR39
million lower than depreciation. Capital expenditure is expected to increase in
the second half as several capital projects are scheduled to take place, when a
number of the large paper mills take maintenance downtime during the second
half.
Mondi has now entered into new borrowing facilities and repaid the intercompany
debt owed to its former parent Anglo American plc. As at 30 June 2007, Mondi
had committed debt facilities of EUR2,648 million (at an average maturity of
3.7 years) of which EUR1,473 million was undrawn.
Current year outlook
In the second half we expect to see continued pressure from rising input costs
and weakness of the US dollar. However the positive trends in Mondi`s key
business segments are expected to continue and the Board is confident of
achieving good progress for the year as a whole.
INDEPENDENT REVIEW REPORT TO MONDI LIMITED
Introduction
We have been instructed by the company to review the financial information of
the Mondi Group for the six months ended 30 June 2007 which comprises a
combined condensed consolidated income statement, a combined condensed
consolidated balance sheet, a combined condensed consolidated cash flow
statement, a combined condensed consolidated statement of total recognised
income and expense and notes 1 to 16. We have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors` responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the basis
of preparation set out in Note 1, the JSE Listing Requirements and the
requirements of IAS 34 which require that the accounting policies and
presentation applied to the interim figures are consistent with those applied
in preparing the preceding audited financial information except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in
International Standards on Review Engagements 2410 - "Review of Interim
Financial Information performed by Independent Auditors of the Entity" issued
by the IASB. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with International Standards on
Auditing and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Deloitte & Touche
Per C Sagar
Partner
1 August 2007
Note: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.
INDEPENDENT REVIEW REPORT TO MONDI PLC
Introduction
We have been instructed by the company to review the financial information of
the Mondi Group for the six months ended 30 June 2007 which comprises a
combined condensed consolidated income statement, a combined condensed
consolidated balance sheet, a combined condensed consolidated cash flow
statement, a combined condensed consolidated statement of total recognised
income and expense and notes 1 to 16. We have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our review work, for this report, or for the conclusions
we have formed.
Directors` responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the basis
of preparation set out in Note 1, the Listing Rules of the Financial Services
Authority and the requirements of IAS 34 which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding audited financial information except
where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Deloitte & Touche LLP
Chartered Accountants
London
1 August 2007
Notes: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
Combined condensed consolidated income statement
For the six months ended 30 June 2007
Reviewed
Six months ended 30 June
2007
Before Special
special items
EUR million Note items (note 4)
Group revenue (3) 3,052 - 3,052
Materials, energy and
(1,577) - (1,577)
consumables used
Variable selling expenses (280) - (280)
Gross margin 1,195 - 1,195
Maintenance and other indirect
expenses (130) - (130)
Personnel costs (446) - (446)
Other net operating expenses (198) (8) (206)
Depreciation and amortisation (178) - (178)
Operating profit/(loss) from
subsidiaries and joint ventures (3) 243 (8) 235
Net profit/(loss) on disposals (4) - 84 84
Net income from associates (3) 2 - 2
Total profit/(loss) from
operations
and associates 245 76 321
Investment income 21 - 21
Interest expense (63) (29) (92)
Net finance costs (5) (42) (29) (71)
Profit/(loss) before tax 203 47 250
Taxation (charge)/credit (6) (61) 1 (60)
Profit/(loss) for the financial
period/year 142 48 190
Attributable to:
Minority interests 26 - 26
Shareholders of the parent
company 116 48 164
Pro forma earnings per share
(EPS) for profit attributable to
equity holders
Basic EPS (EUR cents) (7) 31.9
Headline EPS (EUR cents) (7) 17.3
Underlying EPS (EUR cents) (7) 22.6
Reviewed
Six months ended 30 June
2006
Before Special
special items
EUR million items (note 4)
Group revenue 2,857 - 2,857
Materials, energy and
(1,458) - (1,458)
consumables used
Variable selling expenses (278) - (278)
Gross margin 1,121 - 1,121
Maintenance and other indirect
expenses (134) - (134)
Personnel costs (447) - (447)
Other net operating expenses (197) (57) (254)
Depreciation and amortisation (177) - (177)
Operating profit/(loss) from
subsidiaries and joint ventures 166 (57) 109
Net profit/(loss) on disposals - (4) (4)
Net income from associates 4 - 4
Total profit/(loss) from operations
and associates 170 (61) 109
Investment income 35 - 35
Interest expense (80) - (80)
Net finance costs (45) - (45)
Profit/(loss) before tax 125 (61) 64
Taxation (charge)/credit (42) 14 (28)
Profit/(loss) for the financial
period/year 83 (47) 36
Attributable to:
Minority interests 22 - 22
Shareholders of the parent
company 61 (47) 14
Pro forma earnings per share
(EPS) for profit attributable to
equity holders
Basic EPS (EUR cents) 2.7
Headline EPS (EUR cents) 12.1
Underlying EPS (EUR cents) 11.9
Audited
Year ended 31 December
2006
Before Special
special items
EUR million items (note 4)
Group revenue 5,751 - 5,751
Materials, energy and
(2,960) - (2,960)
consumables used
Variable selling expenses (558) - (558)
Gross margin 2,233 - 2,233
Maintenance and other indirect
expenses (287) - (287)
Personnel costs (874) - (874)
Other net operating expenses (346) (78) (424)
Depreciation and amortisation (349) - (349)
Operating profit/(loss) from
subsidiaries and joint ventures 377 (78) 299
Net profit/(loss) on disposals - (4) (4)
Net income from associates 5 - 5
Total profit/(loss) from operations
and associates 382 (82) 300
Investment income 70 - 70
Interest expense (147) - (147)
Net finance costs (77) - (77)
Profit/(loss) before tax 305 (82) 223
Taxation (charge)/credit (115) 21 (94)
Profit/(loss) for the financial
period/year 190 (61) 129
Attributable to:
Minority interests 51 - 51
Shareholders of the parent
company 139 (61) 78
Pro forma earnings per share
(EPS) for profit attributable to
equity holders
Basic EPS (EUR cents) 15.2
Headline EPS (EUR cents) 28.2
Underlying EPS (EUR cents) 27.0
Combined condensed consolidated balance sheet
As at 30 June 2007
Reviewed Reviewed Audited
As at 30 As at 30 As at 31
June June December
EUR million Note 2007 2006 2006
Intangible assets 381 366 381
Property, plant and equipment 3,594 3,534 3,659
Forestry assets 220 215 221
Investments in associates 7 42 7
Financial asset investments 25 48 39
Deferred tax assets 40 35 35
Retirement benefit surplus 25 1 35
Total non-current assets 4,292 4,241 4,377
Inventories 710 657 656
Trade and other receivables 1,355 1,257 1,268
Current tax assets 33 19 34
Cash and cash equivalents (9) 176 421 415
Other current financial assets
(derivatives) 7 15 11
Total current assets 2,281 2,369 2,384
Assets held for sale 2 20 106
6,575 6,630 6,867
Total assets
Short-term borrowings (9) (311) (1,167) (1,238)
Trade and other payables (1,016) (961) (935)
Current tax liabilities (87) (24) (71)
Provisions (9) (3) (8)
Other current financial
liabilities (derivatives) (2) (3) (2)
Total current liabilities (1,425) (2,158) (2,254)
Medium and long-term borrowings (9) (1,200) (672) (656)
(212) (229) (220)
Retirement benefit obligations
Deferred tax liabilities (322) (309) (325)
Provisions (42) (50) (40)
Other non-current liabilities (15) (14) (16)
Total non-current liabilities (1,791) (1,274) (1,257)
Liabilities directly associated
with assets
classified as held for sale - - (39)
Total liabilities (3,216) (3,432) (3,550)
Net assets 3,359 3,198 3,317
Equity
Equity attributable to equity
holders 3,007 2,913 2,986
Minority interests 352 285 331
Total equity 3,359 3,198 3,317
Pro forma net asset value per
share (EUR per share) 6.53 6.22 6.45
Combined condensed consolidated cash flow statement
For the six months ended 30 June 2007
Reviewed Reviewed
Six months Six months Audited
ended 30 ended 30 Year ended
June June 31 December
EUR million Note 2007 2006 2006
Cash inflows from
operations 356 229 657
Dividends from associates 1 1 1
Dividends from financial
investments - - 1
Income tax paid (40) (34) (71)
Net cash inflows from
operating activities 317 196 588
Cash flows from
investing activities
Acquisition of
subsidiaries, net of
cash and cash equivalents (7) (68) (113)
Investment in associates - - (2)
Disposal of
subsidiaries, associates
and joint
ventures, net of cash
and cash equivalents 157 29 34
Purchases of property,
plant and equipment (10) (139) (209) (460)
Proceeds from the
disposal of property,
plant and equipment 4 9 16
Investment in forestry
assets (19) (26) (50)
Purchases of
financial/fixed asset
investments - (1) (1)
Purchase of intangible
assets (2) - (6)
Proceeds from the sale
of financial/fixed asset
investments - 1 3
Loan repayments from
related parties 11 14 9
Interest received 9 22 51
Other investing
activities (1) (7) (5)
Net cash generated
from/(used in) investing
activities 13 (236) (524)
Cash flows from
financing activities
Repayment of short-term
borrowings (889) (393) (355)
Proceeds from medium and
long-term borrowings 548 24 70
Interest paid (88) (77) (130)
Dividends paid to
minority interests (21) (29) (38)
Dividends paid to
Anglo American group
companies (202) (22) (75)
Proceeds from current
asset investments - (1) -
Increase in invested
capital 105 294 289
Other financing
activities 5 6 5
Net cash used in
financing activities (542) (198) (234)
Net decrease in cash and
cash equivalents (212) (238) (170)
Cash and cash
equivalents (1) at start
of period 358 574 574
Cash movements in the
period (212) (238) (170)
Reclassifications (3) - (3)
Effects of changes in
foreign exchange rates (7) (37) (43)
Cash and cash
Equivalents (1) at end of
period 136 299 358
Note:
1 Includes overdrafts and cash balances in disposal groups.
Combined consolidated statement of recognised income and expense
For the six months ended 30 June 2007
Audited
Reviewed Reviewed Year
Six months Six months ended 31
ended 30 ended 30 December
June June
EUR million 2007 2006 2006
(Loss)/gain on cash flow hedges (6) 12 8
Actuarial (losses)/gains on
post-retirement benefit schemes (8) 5 60
Related deferred tax credit/(charge) 3 (4) (21)
Exchange losses on translation of
foreign operations (35) (179) (137)
Other movements 2 (5) 3
Net expense recognised directly in
reserves (44) (171) (87)
Profit for the period 190 36 129
Total recognised income and expense
for the year 146 (135) 42
Attributable to:
Minority interests 32 10 65
Shareholders of the parent company 114 (145) (23)
Notes to the financial information
1 Basis of preparation
The combined condensed interim financial information for the six months ended
30 June 2007 presents the financial record of those businesses held by Mondi
Limited and Mondi plc at the date of Admission of their shares on the
Johannesburg Securities Exchange ("JSE") and the London Stock Exchange ("LSE")
respectively. The combined condensed interim financial information therefore
comprises an aggregation of amounts included in the financial statements of
Mondi entities and former Anglo American entities (together "the Group").
During the period and the prior periods presented, the Group did not form a
separate legal group and therefore it is not meaningful to show the share
capital or an analysis of reserves within the combined condensed interim
financial information, although the non-adjusting effects of the dual listing
are analysed as part of a review of post balance sheet events. Instead the
"Equity attributable to equity holders" is presented, which represents the
aggregated share capital, share premiums and reserves of the Group`s entities,
and debtor and creditor balances between Anglo American and the Group, which
are considered to be equity funding in nature. Any interest accruing on such
balances is classified as a "dividend in specie" and recorded separately
through reserves, not through the income statement.
The combined condensed interim financial statements for the six months ended 30
June 2007, which were approved by the Board on 1 August 2007, do not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985
of the United Kingdom. This interim financial information has been prepared in
accordance with IAS 34, `Interim Financial Reporting` and should be read in
conjunction with the financial information for the year ended 31 December 2006
included within Part VIII: "Financial information", of the Prospectus dated 1
June 2007.
2 Accounting policies
The same accounting policies, presentation and measurement principles have been
followed in the condensed set of interim financial statements as applied in the
Group`s audited financial information for the year ended 31 December 2006,
included within Part VIII: "Financial information", of the Prospectus dated 1
June 2007.
Notes to the financial information continued
3 Segmental information
Primary reporting format - by business segment
Primary segment disclosures for revenues are as follows:
Six months ended 30 June 2007
Inter-
Segment segment Group
EUR million revenue revenue revenue
Subsidiaries and joint
ventures
Mondi Packaging
Corrugated Business 768 (33) 735
Bag Business 634 (21) 613
Flexibles Business 384 (15) 369
Intra-group sales (50) 50 -
1,736 (19) 1,717
Mondi Business Paper 966 (86) 880
Mondi Packaging South
Africa 173 (17) 156
Merchant and Newsprint
businesses 286 (1) 285
Corporate and other
businesses 14 - 14
Elimination of inter-segment
revenue (123) 123 -
Total subsidiaries and joint
ventures 3,052 - 3,052
Associates
Mondi Packaging 8 - 8
Mondi Business Paper 25 - 25
Mondi Packaging South
Africa 3 - 3
Total associates 36 - 36
Total Group operations 3,088 - 3,088
Six months ended 30 June 2006
Inter-
segment Group Segment
EUR million revenue revenue revenue
Subsidiaries and joint
ventures
Mondi Packaging
Corrugated Business 731 (40) 691
Bag Business 561 (16) 545
Flexibles Business 304 (13) 291
Intra-group sales (46) 46 -
1,550 (23) 1,527
Mondi Business Paper 958 (75) 883
Mondi Packaging South
Africa 185 (13) 172
Merchant and Newsprint
businesses 260 - 260
Corporate and other
businesses 15 - 15
Elimination of inter-segment
revenue (111) 111 -
Total subsidiaries and joint
ventures 2,857 - 2,857
Associates
Mondi Packaging 102 - 102
Mondi Business Paper 21 - 21
Mondi Packaging South
Africa 1 - 1
Total associates 124 - 124
Total Group operations 2,981 - 2,981
Year ended 31 December 2006
Inter-
segment Segment Group
EUR million revenue revenue revenue
Subsidiaries and joint
ventures
Mondi Packaging
Corrugated Business 1,497 (86) 1,411
Bag Business 1,162 (31) 1,131
Flexibles Business 607 (28) 579
Intra-group sales (99) 99 -
3,167 (46) 3,121
Mondi Business Paper 1,889 (163) 1,726
Mondi Packaging South
Africa 360 (25) 335
Merchant and Newsprint
businesses 539 (1) 538
Corporate and other
businesses 31 - 31
Elimination of inter-segment
revenue (235) 235 -
Total subsidiaries and joint
ventures 5,751 - 5,751
Associates
Mondi Packaging 168 - 168
Mondi Business Paper 40 - 40
Mondi Packaging South
Africa 8 - 8
Total associates 216 - 216
Total Group operations 5,967 - 5,967
Primary segment disclosures for profits are as follows:
Segment operating profit before
special items (1)
Six Six
months months Year
ended 30 ended 30 ended
June June 31 Dec
EUR million 2007 2006 2006
Subsidiaries and joint ventures
Mondi Packaging
Corrugated Business 66 39 120
Bag Business 64 49 97
Flexibles Business 16 10 9
146 98 226
Mondi Business Paper 80 46 104
Mondi Packaging South Africa 15 15 35
Merchant and Newsprint businesses 16 12 29
Corporate and other businesses (14) (5) (17)
Total subsidiaries and joint ventures 243 166 377
Net income from associates
Mondi Packaging 1 4 4
Mondi Business Paper 1 - 1
Total associates 2 4 5
Total Group operations including net
income from associates 245 170 382
Net profit/(loss) on disposals - - -
Total profit from operations and
associates 245 170 382
Segment operating profit
after special items
Six Six
months months Year
ended 30 ended 30 ended
June June 31 Dec
EUR million 2007 2006 2006
Subsidiaries and joint ventures
Mondi Packaging
Corrugated Business 66 (10) 71
Bag Business 64 41 89
Flexibles Business 16 9 4
146 40 164
Mondi Business Paper 76 47 88
Mondi Packaging South Africa 16 15 35
Merchant and Newsprint businesses 16 12 29
Corporate and other businesses (19) (5) (17)
Total subsidiaries and joint ventures 235 109 299
Net income from associates
Mondi Packaging 1 4 4
Mondi Business Paper 1 - 1
Total associates 2 4 5
Total Group operations including net
income from associates 237 113 304
Net profit/(loss) on disposals 84 (4) (4)
Total profit from operations and
associates 321 109 300
Note:
1 Special items are set out in note 4.
Primary segment disclosures for segment assets and liabilities are as follows:
As at 30 June 2007
Net
EUR million Segment Segment segment
assets liabilities assets (1)
Subsidiaries and joint
ventures
Mondi Packaging
Corrugated Business 1,244 (217) 1,027
Bag Business 1,311 (175) 1,136
Flexibles Business 467 (79) 388
3,022 (471) 2,551
Mondi Business Paper 2,440 (260) 2,180
Mondi Packaging South
Africa 261 (53) 208
Merchant and Newsprint
businesses 348 (64) 284
Corporate and other
businesses 26 (5) 21
6,097 (853) 5,244
Unallocated:
Investment in associates 7 - 7
Deferred tax
assets/(liabilities) 40 (322) (282)
Other non-operating
assets/(liabilities) 230 (530) (300)
Trading capital employed 6,374 (1,705) 4,669
Financial investments 25 - 25
Net debt 176 (1,511) (1,335)
Net assets 6,575 (3,216) 3,359
As at 30 June 2006
Net
EUR million Segment Segment segment
assets liabilities assets (1)
Subsidiaries and joint
ventures
Mondi Packaging
Corrugated Business 1,220 (230) 990
Bag Business 1,270 (168) 1,102
Flexibles Business 390 (70) 320
2,880 (468) 2,412
Mondi Business Paper 2,415 (258) 2,157
Mondi Packaging South
Africa 230 (28) 202
Merchant and Newsprint
businesses 314 (63) 251
Corporate and other
businesses 26 (6) 20
5,865 (823) 5,042
Unallocated:
Investment in associates 42 - 42
Deferred tax
assets/(liabilities) 35 (309) (274)
Other non-operating
assets/(liabilities) 219 (461) (242)
Trading capital employed 6,161 (1,593) 4,568
Financial investments 48 - 48
Net debt 421 (1,839) (1,418)
Net assets 6,630 (3,432) 3,198
As at 31 December 2006
Net
EUR million Segment Segment segment
assets liabilities assets (1)
Subsidiaries and joint
ventures
Mondi Packaging
Corrugated Business 1,263 (233) 1,030
Bag Business 1,265 (175) 1,090
Flexibles Business 432 (58) 374
2,960 (466) 2,494
Mondi Business Paper 2,484 (253) 2,231
Mondi Packaging South
Africa 247 (52) 195
Merchant and Newsprint
businesses 317 (65) 252
Corporate and other
businesses 34 (7) 27
6,042 (843) 5,199
Unallocated:
Investment in associates 7 - 7
Deferred tax
assets/(liabilities) 35 (325) (290)
Other non-operating
assets/(liabilities) 329 (488) (159)
Trading capital employed 6,413 (1,656) 4,757
Financial investments 39 - 39
Net debt 415 (1,894) (1,479)
Net assets 6,867 (3,550) 3,317
Note:
1 Net segment assets are operating assets less operating liabilities. Operating
assets are intangible assets, tangible assets, forestry assets, retirement
benefit surplus, inventories and operating receivables. Operating liabilities
are non-interest bearing current liabilities, restoration and decommissioning
provisions and provisions for post-retirement benefits.
Secondary reporting format - by geographical segment
Secondary segmental information of revenue by customer location is as follows:
Revenue
Six months Six months Year ended
ended 30 ended 30 December
EUR million June 2007 June 2006 2006
Subsidiaries and joint ventures
South Africa 291 307 592
Rest of Africa 93 95 186
Western Europe 1,587 1,470 2,932
Eastern Europe 492 424 856
Russia 258 220 453
North America 98 105 215
South America 10 9 26
Asia and Australia 223 227 491
Total subsidiaries and joint
ventures 3,052 2,857 5,751
Associates
South Africa 3 1 8
Rest of Africa 6 4 4
Western Europe - 82 136
Eastern Europe 27 30 55
North America - 3 6
South America - 1 1
Asia and Australia - 3 6
Total associates 36 124 216
Total Group operations including
associates 3,088 2,981 5,967
Additional disclosure of secondary segmental information of revenue by origin
is as follows:
Revenue
Six months Six months Year ended
ended 30 ended 30 December
EUR million June 2007 June 2006 2006
Subsidiaries and joint ventures
South Africa 469 499 982
Rest of Africa 5 6 14
Western Europe 1,376 1,274 2,582
Eastern Europe 797 703 1,417
Russia 270 237 482
North America 61 62 121
Asia and Australia 74 76 153
Total subsidiaries and joint
ventures 3,052 2,857 5,751
Associates
South Africa 3 1 8
Rest of Africa 6 4 4
Western Europe - 96 161
Eastern Europe 27 23 43
Total associates 36 124 216
Total Group operations including
associates 3,088 2,981 5,967
The Group`s geographical analysis of segment assets and liabilities, allocated
based on where assets and liabilities are located, is:
As at 30 June 2007
Net
EUR million Segment Segment segment
assets liabilities assets
Subsidiaries and joint
ventures
South Africa 1,428 (183) 1,245
Rest of Africa 11 (6) 5
Western Europe 2,310 (378) 1,932
Eastern Europe 1,676 (196) 1,480
Russia 446 (35) 411
North America 113 (16) 97
Asia and Australia 113 (39) 74
Total subsidiaries and joint
ventures 6,097 (853) 5,244
As at 30 June 2006
Net
EUR million Segment Segment segment
assets liabilities assets
Subsidiaries and joint
ventures
South Africa 1,368 (131) 1,237
Rest of Africa 13 (6) 7
Western Europe 2,316 (438) 1,878
Eastern Europe 1,504 (156) 1,348
Russia 437 (36) 401
North America 111 (17) 94
Asia and Australia 116 (39) 77
Total subsidiaries and joint
ventures 5,865 (823) 5,042
As at 31 December 2006
Net
EUR million Segment Segment segment
assets liabilities assets
Subsidiaries and joint
ventures
South Africa 1,500 (203) 1,297
Rest of Africa 15 (7) 8
Western Europe 2,231 (357) 1,874
Eastern Europe 1,633 (181) 1,452
Russia 436 (34) 402
North America 121 (23) 98
Asia and Australia 106 (38) 68
Total subsidiaries and joint
ventures 6,042 (843) 5,199
4 Special items
Six months Six months Year ended
ended 30 ended 30 31 December
EUR million June 2007 June 2006 2006
Subsidiaries and joint ventures
Operating special items
Mondi Packaging asset impairments - (58) (62)
Mondi Business Paper asset
impairments (4) 1 (19)
Retention arrangements (5) - -
Mondi Packaging South Africa
negative goodwill 1 - -
Mondi Business Paper negative
goodwill - - 3
Total operating special items (8) (57) (78)
Profit and (losses) on disposals
Disposal of partial interest in
Mondi Packaging Paper Swiecie SA 57 - -
Disposal of interest in Bischof +
Klein GmbH 19 - -
Sale of assets and other items 8 (4) (4)
Net profit/(loss) on disposal 84 (4) (4)
Financing cost (29) - -
Total non-operating special items 55 (4) (4)
Total special items before tax
and minority interests 47 (61) (82)
Taxation 1 14 21
Total attributable to
shareholders of the parent
company 48 (47) (61)
"Special items" are those items of financial performance that the Group
believes should be separately disclosed on the face of the income statement to
assist in the understanding of the underlying financial performance achieved by
the Group and its businesses. Such items are material by nature or amount to
the financial period`s/year`s results and require separate disclosure in
accordance with IAS 1, `Presentation of Financial Statements`. Special items
that relate to the operating performance of the Group are classified as special
operating items and include impairment charges and reversals and other
exceptional items including material restructuring costs. Non-operating special
items include profits and losses on disposals of investments and businesses.
Non-operating special items
The Group disposed of 5.3% of its interest in Mondi Packaging Paper Swiecie SA,
a subsidiary in which the Group retains control, on 15 May 2007 for
consideration of EUR66 million and a profit of EUR57 million and its entire
interest in Bischof + Klein GmbH, formerly an associate entity of the Group, on
22 February 2007 for consideration of EUR54 million and a profit of EUR19
million. Assets held for sale as at 31 December 2006 and representing the
Group`s corrugated converting operations were disposed of in the six months
ended 30 June 2007. The profit on disposal of these operations was EUR8 million.
A one-off finance cost of EUR29 million resulted from a refinancing arrangement
entered into in South Africa (see note 9).
Operating special items
An impairment of the carbonless plant held in South Africa, resulting from a
decline in the market for carbonless paper, accounts for EUR4 million of the
operating special charge. Senior management, principally equity- settled,
retention arrangements of EUR5 million represents the charge in the period of a
total cost of approximately EUR24 million to be spread over the period until 3
July 2009. The cost of these two special items has been partially offset by
negative goodwill of EUR1 million on an acquisition within the Mondi Packaging
South Africa business segment.
5 Net finance costs
Six months Six months ended Year ended 31
ended 30 June 30 June December
EUR million 2007 2006 2006
Investment income
Interest and other
financial income 9 27 39
Expected return on
defined benefit
arrangements 10 10 18
Foreign exchange
gains/(losses) 2 (2) 12
Dividend income from
financial/fixed asset
investments - - 1
Total investment income 21 35 70
Interest expense
Bank loans and
overdrafts (41) (58) (102)
Special items
financing cost (note 4) (29) - -
Other loans (11) (9) (17)
Interest on defined
benefit arrangements (13) (14) (30)
(94) (81) (149)
Less: interest
capitalised 2 1 2
Total interest expense (92) (80) (147)
Net finance costs (71) (45) (77)
Finance costs and foreign exchange gains/(losses) are presented net of
effective cash flow hedges for respective interest bearing and foreign currency
borrowings.
6 Income tax expense
Six months Six months Year ended
ended 30 June ended 30 June 31 December
EUR million 2007 2006 2006
United Kingdom - (5) (7)
Overseas 58 47 119
58 42 112
Deferred taxation 2 (14) (18)
60 28 94
The Group`s share of associated undertakings` taxation for the six months ended
30 June 2007 was EUR0.4 million (six months ended 30 June 2006: EUR1 million,
year ended 31 December 2006: EUR1 million).
The Group`s effective tax rate before special items for the six months ended 30
June 2007 is 30 per cent (six months ended 30 June: 34 per cent). The Group`s
reported tax rate for the six months ended 30 June 2007 is 24 per cent (30 June
2006: 44 per cent).
7 Pro forma EPS
Six months Six months Year ended
ended 30 June ended 30 June 31 December
EUR cents per share 2007 2006 2006
Basic EPS 31.9 2.7 15.2
Headline EPS (1) 17.3 12.1 28.2
Underlying EPS (2) 22.6 11.9 27.0
Notes:
1 Headline earnings has been calculated in accordance with Circular 7/2002,
`Headline Earnings`, as issued by the South African Institute of Chartered
Accountants. Please see the reconciliation below.
2 The directors believe that underlying earnings provides a useful additional
measure of the Group`s underlying performance.
The calculation of basic EPS has been based on the profit for the six month
period/financial year, as shown below, and on 514,137,127 shares, which
represents the aggregate number of shares that were issued upon Admission on 3
July 2007 (see note 16). The Group was not a stand-alone entity prior to the
demerger date. The number of shares in issue has therefore been retrospectively
applied to the comparative periods, so that a meaningful comparison can be
made.
The Group has also presented underlying EPS and headline EPS. Underlying EPS
excludes the impact of special items, in order to present an additional
comparison for the periods shown in the combined condensed consolidated
financial information. The presentation of headline EPS is mandated under the
JSE Listing Requirements.
The calculation of headline earnings and underlying earnings, based on basic
earnings is as follows:
Earnings
Six months Six months Year ended 31
ended 30 June ended 30 June December
EUR million 2007 2006 2006
Attributable profit for the
financial year 164 14 78
Special items: operating 8 57 78
Special items: financing
costs 29 - -
Net (profit)/loss on
disposals (84) 4 4
Related tax (1) (14) (21)
Underlying earnings 116 61 139
Special items: financing
costs (29) - -
Special items: retention
arrangements (5) - -
Loss on disposal of
tangible fixed assets 1 1 8
Related tax 6 - (2)
Headline earnings 89 62 145
Diluted EPS is not presented as there are no dilutive potential ordinary shares
in issue as at 30 June 2007. The potential dilutive impact of the Group`s share
scheme awards, which become effective on 3 July 2007, will be only assessed in
the Group`s 2007 Annual Report.
8 Dividends
Six months
ended 30 June
2007
EUR million
Interim dividend 38
The interim dividend for 2007 of 7.3 euro cents per ordinary share will be paid
to equity holders, other than those holders within the Lloyds TSB Corporate
Nominee, on 17 September 2007 based on the shareholder registers on 31 August
2007. The dividend will be paid from the distributable reserves of Mondi
Limited, as presented in the annual financial statements of Mondi Limited for
the year ended 31 December 2006 and from the distributable reserves of Mondi
plc, as presented in the Initial Accounts for the period ended 2 July 2007.
The relevant dates for the payment of the dividends are:
Mondi Limited Mondi plc
Currency conversion dates
Euro/sterling 1 August 2007 1 August 2007
ZAR/euro 1 August 2007 1 August 2007
Last date to trade shares
cum-dividend
JSE Limited 24 August 2007 24 August 2007
LSE Not applicable 28 August 2007
Shares commence trading ex-dividend
JSE Limited 27 August 2007 27 August 2007
LSE Not applicable 29 August 2007
Record date
JSE Limited 31 August 2007 31 August 2007
LSE Not applicable 31 August 2007
Last date for Dividend Reinvestment
Plan (DRIP) elections by Central
Securities Depositary
Participants 5 September 2007 5 September 2007
Last date for DRIP elections to UK
Registrar and South African
Transfer Secretaries by
shareholders of Mondi Limited,
Mondi plc and
by holders in the Corporate
Nominee 6 September 2007 6 September 2007
Payment date
UK Register Not applicable 17 September 2007
South African Register 17 September 2007 17 September 2007
Depositary Interest Holders
(dematerialised) 17 September 2007 Not applicable
Payment date for holders within
Lloyds TSB Corporate Nominee 25 September 2007 Not applicable
DRIP purchase settlement date 25 September 2007 25 September 2007
Share certificates on the South African registers of Mondi Limited and Mondi
plc may not be dematerialised or rematerialised between 27 August 2007 and 2
September 2007, both dates inclusive, nor may transfers between the UK and
South African registers of Mondi plc take place between 1 August 2007 and 2
September 2007, both dates inclusive.
9 Net debt
The Group`s net debt position, excluding disposal groups for relevant periods,
is as follows:
Cash and Debt due Debt due
EUR million cash within one after one
equivalents (1) year (2) year
Balance at 1 January 2006 574 (1,490) (710)
Cash flow (238) 393 (24)
Business combinations/disposal of
business - (24) -
Currency movements (37) 76 62
Closing balance at 30 June 2006 299 (1,045) (672)
Cash flow 68 (38) (46)
Business combinations/disposal of
business - (18) (8)
(3) - 4
Transfer to disposal groups
Reclassifications - (78) 78
Currency movements (6) (2) (12)
Closing balance at 31 December
358 (1,181) (656)
2006
Cash flow (212) 889 (548)
Business combinations/disposal of
business - 7 -
Reclassifications (3) 3 -
(7) 11 4
Currency movements
Closing balance at 30 June 2007 136 (271) (1,200)
Loans to Total
EUR million related net debt
parties
Balance at 1 January 2006 14 (1,612)
Cash flow (14) 117
Business combinations/disposal of
business - (24)
Currency movements - 101
Closing balance at 30 June 2006 - (1,418)
Cash flow - (16)
Business combinations/disposal of
business - (26)
- 1
Transfer to disposal groups
Reclassifications - -
Currency movements - (20)
Closing balance at 31 December
- (1,479)
2006
Cash flow - 129
Business combinations/disposal of
business - 7
Reclassifications - -
- 8
Currency movements
Closing balance at 30 June 2007 - (1,335)
Notes:
1 The Group operates in certain countries (principally South Africa) where the
existence of exchange controls may restrict the use of certain cash balances.
These restrictions are not expected to have any material effect on the Group`s
ability to meet its ongoing obligations.
2 Excludes overdrafts, which are included as cash and cash equivalents. At 30
June 2007, short-term borrowings on the balance sheet of EUR311 million (30
June 2006: EUR1,167 million, 31 December 2006: EUR1,238 million) include EUR40
million of overdrafts (30 June 2006: EUR122 million, 31 December 2006: EUR57
million).
In order to provide for its ongoing capital needs, the Group entered into two
additional external financing arrangements prior to the period end. The amounts
drawn down on these facilities have been used to refinance existing debt
obligations outstanding to the Anglo American Group and other third parties.
EUR1.55 billion Syndicated Revolving Credit Facility (UKRCF)
The UKRCF is a five year multi-currency revolving credit facility which was
signed on 22 June 2007. Interest is charged on the balance outstanding at a
market-related rate linked to LIBOR.
ZAR 2 billion Term Loan Facility (SATF)
The SATF is a South African rand three year amortising term loan which was
signed and drawn down on 4 May 2007. Interest is charged on the balance
outstanding at a market-related rate linked to JIBAR.
10 Capital expenditure (1)
Six months ended 30 Six months ended 30 Year ended 31
EUR million June 2007 June 2006 December 2006
By business
segment
Mondi Packaging
Corrugated Business 31 38 125
Bag Business 21 59 118
Flexibles Business 8 9 24
60 106 267
Mondi Business Paper 52 84 156
Mondi Packaging
South Africa 14 16 27
Merchant and
Newsprint businesses 8 2 9
Corporate and
other businesses 5 1 1
Capital expenditure 139 209 460
Note:
1 Excludes business combinations.
11 EBITDA
A reconciliation of cash inflows from operations to EBITDA is presented as
follows:
Reviewed Reviewed Audited
Six months Six months Year
ended 30 ended 30 ended 31
June June December
EUR million 2007 2006 2006
Cash inflows from operations 356 229 657
Share option expense (3) (3) (6)
Fair value gains on forestry assets 13 16 37
Cost of felling (26) (32) (58)
Decrease in provisions and
post-employment benefits 10 32 39
Increase in inventories 52 30 14
Increase in operating receivables 99 78 48
(Increase)/decrease in operating
payables (92) (9) 20
Other adjustments 12 2 (25)
EBITDA (1) 421 343 726
Note:
1 EBITDA is operating profit before special items plus depreciation and
amortisation in subsidiaries and joint ventures.
EBITDA by primary business segment is presented as follows:
Six months ended 30 Six months ended 30 Year ended 31
EUR million June 2007 June 2006 December 2006
By business
segment
Mondi Packaging
Corrugated Business 106 83 206
Bag Business 103 86 174
Flexibles Business 28 22 32
237 191 412
Mondi Business Paper 149 114 237
Mondi Packaging
South Africa 21 21 46
Merchant and
Newsprint businesses 27 22 48
Corporate and
other businesses (13) (5) (17)
EBITDA 421 343 726
EBITDA is stated before special items and is reconciled to "Total profit from
operations and associates" as follows:
Six months Six months
ended 30 ended 30 Year ended
EUR million June 2007 June 2006 31 December 2006
Total profit from operations
and associates 321 109 300
Operating special items
(excluding
associates) 8 57 78
Net (profit)/loss on
disposals
(excluding associates) (84) 4 4
Depreciation and
amortisation:
subsidiaries and joint
ventures 178 177 349
Share of associates` net
income (2) (4) (5)
EBITDA 421 343 726
12 Retirement benefits
Material schemes
The Group`s material defined benefit scheme liabilities were actuarially
assessed on a roll-forward basis for the six months ended 30 June 2007. The net
change in actuarial assumptions from the year ended 31 December 2006 resulted
in an immaterial impact on the present value of the scheme liabilities. The
assets backing these material scheme liabilities were updated to reflect their
market values as at 30 June 2007. Any difference between the expected return on
assets and the actual return on assets has been recognised as an actuarial
movement in the combined condensed consolidated statement of recognised income
and expense in accordance with the Group`s accounting policy. The restriction
of the surplus on the South African schemes increased by EUR12 million as a
result of a decrease in anticipated future employee contributions.
Other Group schemes
The other Group defined benefit schemes are calculated on a year-to-date basis,
using the same assumptions as were used in the actuarial valuation carried out
for the year ended 31 December 2006. There have not been any significant
fluctuations or one-off events in the period that would require adjustment to
these actuarial assumptions.
13 Capital commitments
As at 31
As at 30 June As at 30 June December
EUR million 2007 2006 2006
Contracted but not provided 79 40 37
14 Contingent liabilities
Contingent liabilities comprise aggregate amounts at 30 June 2007 of EUR17
million (30 June 2006: EUR21 million, 31 December 2006: EUR34 million) in
respect of loans and guarantees given to banks and other third parties.
15 Related party transactions
The Group has a related party relationship with its associates and joint
ventures.
The Group and its subsidiaries, in the ordinary course of business, enter into
various sales, purchase and service transactions with joint ventures and
associates and others in which the Group has a material interest.
These transactions are under terms that are no less favourable than those
arranged with third parties. These transactions, in total, are not considered
to be significant.
Mr Ramaphosa, non-executive Joint Chairman of Mondi, has a 39.96% stake in
Shanduka Group (Pty) Limited, an entity that has controlling interests in
Shanduka (Pty) Limited and Shanduka Packaging (Pty) Limited and participating
interests in Mondi Shanduka Newsprint (Pty) Limited, Kangra Coal (Pty) Limited
and Mondi Packaging South Africa (Pty) Limited. Fees of EUR200,000 and
EUR345,000 were paid to Shanduka (Pty) Limited and Shanduka Packaging (Pty)
Limited respectively for management services provided to the Group in the six
months ended 30 June 2007. Shanduka Packaging (Pty) Limited has also provided
finance to the Group. The balance outstanding as at 30 June 2007 was EUR7
million. In the normal course of business, and on an arm`s length basis, the
Group purchased supplies from Kangra Coal (Pty) Limited totalling EUR8 million
during the period. EUR1 million remains outstanding on these purchases as at 30
June 2007. Comparatives have not been disclosed because Mr Ramaphosa became a
related party on his appointment as non-executive Joint Chairman on 16 May
2007.
Dividends received from associates for the six months ended 30 June 2007
totalled EUR1 million (six months ended 30 June 2006: EUR1 million, 31 December
2006: EUR1 million), as disclosed in the combined condensed consolidated cash
flow statement.
EUR million Anglo American Group Joint Ventures Associates
Six months ended 30
June 2007
Sales to related
parties - - 1
Purchases from
related parties (6) - (68)
Net finance
income/(costs) 2 (2) -
Dividends paid to
related parties (202) - -
Dividends in specie (32) - -
Receivables due from
related parties - 1 -
Cash held by related
parties - 2 -
Total borrowings
from related parties (4) (7) -
Six months ended 30
June 2006
Sales to related
parties - - 3
Purchases from
related parties - - (3)
Net finance costs (21) - -
Dividends paid to
related parties (22) - -
Dividends in specie (32) - -
Loans to related
parties - 35 -
Receivables due from
related parties 1 3 1
Payables due to
related parties - - -
Cash held by related
parties 329 - -
Financial assets and
liabilities 1 - -
Total borrowings
from related parties (836) - -
Year ended 31
December 2006
Sales to related
parties - 10 -
Purchases from
related parties - (2) -
Net finance costs (31) - -
Dividends
(paid)/received
to/from related
parties (75) - 1
Dividends in specie (68) - -
Loans to related
parties - 35 -
Receivables due from
related parties 4 3 1
Payables due to
related parties (2) - -
Cash held by related
parties 286 - -
Total borrowings
from related parties (942) - -
16 Events occurring after 30 June 2007
On 2 July 2007, the execution of the final demerger transaction resulted in the
Mondi companies successfully demerging from Anglo American plc and becoming the
Mondi Group ("the legal Group"). The legal Group has a dual listed structure
and the shares of both Mondi Limited and Mondi plc, the ultimate holding
companies for the African and the non-African assets respectively, were
admitted to the JSE and LSE on 3 July 2007.
The sharing agreement between Mondi Limited and Mondi plc has the effect that
their shareholders can be regarded as having the interests of a single economic
group. Accordingly, the legal Group will present combined and consolidated
financial information representing the combined interests of both sets of
shareholders and encompass the businesses of Mondi Limited and Mondi plc and
their respective subsidiaries, joint ventures and associates.
Share capital
The share capital of Mondi plc was created by way of a dividend in specie made
to Anglo American plc equity holders on a pro rata basis initially of one Mondi
plc ordinary share for every one Anglo American plc ordinary share held. The
share capital was then subsequently reduced by order of the United Kingdom High
Court on 2 July 2007 in order to capitalise Mondi Limited and generate
distributable reserves for the ongoing needs of the Group and its shareholders.
Number of Ordinary Share
shares EUR million shares premium Total
As at
30 June 2007 (1) - - - -
Shares issued
on the JSE 146,896,322 3 540 543
Shares issued
on the LSE 367,240,805 74 - 74
As at 2 July
2007 (2) 514,137,127 77 540 617
Notes:
1 No comparatives have been presented because the Group`s shares were issued on
Admission to the JSE and LSE on 3 July 2007. Prior to this date the Group was
owned by Anglo American plc and presentation of this ownership interest is not
considered to provide a meaningful comparison.
2 In addition, there are special converting shares in issue in both Mondi
Limited of 367,240,805 (EUR8 million) and Mondi plc of 146,896,322 (EUR29
million) that are held on trust and do not carry voting or dividend rights. The
special converting shares provide a mechanism for equality of treatment on
termination for both Mondi Limited and Mondi plc ordinary equity holders.
Mondi plc also issued 50,000 5% cumulative A GBP1 preference shares. The Group
will classify these preference shares as a liability, and not as equity
instruments, since they contractually obligate the Group to make cumulative
dividend payments to the holders. These dividend payments will be treated as
a finance cost rather than distributions in subsequent reporting periods.
Other reserves
Share- Cumulative
based translation Fair value
Retained payment adjustment and other Minority
EUR million earnings reserve reserve reserves (1) interests Total
As at 2 July 2007 2,166 17 (40) 242 352 2,737
Note:
1 Including EUR237 million in respect of the merger reserve created on demerger
from Anglo American plc and in aggregating Mondi Limited and Mondi plc.
Acquisitions
Mondi Packaging South Africa received regulatory approval on 4 July 2007 for
the EUR100 million acquisition of Lenco, a South African rigid plastics
business. Following the successful completion of this acquisition, Lenco`s
results will be consolidated from the second half of 2007.
Production statistics
Six months Six months
ended 30 ended 30 Year ended
June June 31 December
2007 2006 2006
Mondi Packaging
1,035,932 1,009,005 2,044,391
Containerboard tonnes
Kraft paper tonnes 444,625 400,941 850,271
Corrugated board and boxes mm 2 985 1,071 2,103
Industrial bags m units 1,910 1,799 3,606
Coating and release liners mm 2 1,549 1,186 2,360
Pulp - external tonnes 91,834 89,025 180,166
Mondi Business Paper
Uncoated wood free paper tonnes 1,039,145 1,015,481 2,012,295
Newsprint tonnes 99,738 92,056 187,100
Pulp - external tonnes 84,563 52,221 114,099
Wood chips bone dry tonnes 362,089 475,665 886,612
Mondi Packaging South Africa
Packaging papers tonnes 141,339 149,078 369,300
Corrugated board and boxes mm 2 171 142 328
Newsprint Joint Ventures
Newsprint (attributable share) tonnes 156,102 162,065 320,876
Aylesford (attributable share tonnes 94,354 100,272 196,864
Shanduka (attributable share) tonnes 61,748 61,793 124,012
Exchange rates
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2007 2006 2006
Closing rates against the euro
South African rand 9.53 9.13 9.22
Pounds sterling 0.67 0.69 0.67
Polish zloty 3.77 4.08 3.84
Russian rouble 34.83 34.32 34.68
Slovakian koruna 33.61 38.43 34.56
US dollar 1.35 1.28 1.32
Czech koruna 28.71 28.57 27.50
Average rates for the period
against the euro
South African rand 9.52 7.76 8.51
Pounds sterling 0.67 0.69 0.68
Polish zloty 3.84 3.89 3.90
Russian rouble 34.67 34.03 34.14
Slovakian koruna 34.05 37.59 37.25
US dollar 1.33 1.23 1.26
Czech koruna 28.16 28.52 28.37
Contact details:
Mondi Group On 1 August 2007, please contact Financial Dynamics on the
numbers below.
Thereafter, please call:
David Hathorn +27 11 638 4586
Paul Hollingworth +44 (0)1932 826 326
Financial Dynamics
Richard Mountain +44 (0)20 7269 7121 / +44 (0)7909 684 466
Louise Brugman +27 11 214 2415 / +27 83 504 1196
Presentation dial in facility:
A listen only dial in facility will be available for analysts and investors to
listen to the presentation live at 10:30 (SA) and 09:30 (UK) .The dial in
numbers are below. Please quote
conference ID reference 760473
UK: +44 (0)20 7162 0025
SA: 0800 9914 68
Slides to accompany the results presentation will be available for download on
www.mondigroup.com www.mondigroup.com prior to the results
presentation.
An audio recording of the presentation will be available on Mondi`s website
from around midday on 1 August 2007.
Editors` notes:
Mondi is an integrated paper and packaging group founded in South Africa in
1967. In 2006 it had revenues of EUR5,751 million. Its key operations and
interests are in Western Europe, Emerging Europe (including Russia) and South
Africa. Mondi is principally involved in the manufacture of packaging paper,
converted packaging products (including corrugated packaging, bags and flexible
packaging) and office paper.
Mondi is integrated across the paper and packaging production process from the
growing of wood for pulp production and the manufacture of pulp and paper to
the conversion of packaging papers into corrugated packaging and industrial
bags. It also has a growing flexibles business focused on the production of
release liner, extrusion coating and consumer flexibles products.
Mondi employs approximately 33,000 people and has production operations in 113
locations across 35 countries.
Date: 01/08/2007 08:16:51 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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